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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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Form 10-Q/A

Amendment No. 1



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended April 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 000-22009



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NEOMAGIC CORPORATION

(Exact Name of Registrant as Specified in Its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 77-0344424                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|3250 Jay Street Santa Clara, California                        |  | 95054                               
|(Address of Principal executive offices)                       |  | (Zip Code)                          

(408) 988-7020

Registrants telephone number, including area code



---

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large Accelerated Filer ̈Accelerated Filer ̈Non-Accelerated Filer  x

Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes ̈No  x

The number of shares of the Registrants Common Stock, $.001 par value, outstanding
at April 30, 2006 was 9,525,760



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##### Table of Contents

Explanatory Note

NeoMagic Corporation is filing this Amendment No. 1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2006 in response to comments made by the staff of the Securities and Exchange Commission
(SEC) in connection with its review of our registration statement on Form S-3 filed with the Securities and Exchange Commission on April 7, 2006, to correct its Condensed Consolidated Balance Sheets by reclassifying a registration
obligation of $606,000 associated with the Companys December 2005 financing from temporary equity into permanent stockholders equity in Additional Paid-In Capital. The Company also corrected Note 8 to the Condensed Consolidated Financial
Statements to reflect this reclassification.

This Amendment No. 1 presents new certifications pursuant to Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002. The representations contained in the new certifications continue to relate solely to the three months ended April 30, 2006.

Except as described above, no changes have been made to the Quarterly Report as originally filed. This Amendment No. 1 continues to speak as of the date the original Quarterly Report was originally filed and does not
reflect events occurring after the filing of the Quarterly Report as originally filed or modify or update those disclosures affected by subsequent events. Accordingly, this Amendment No. 1 should be read in conjunction with our filings made with the
SEC after the filing of the original Form 10-Q on June 14, 2006.



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NEOMAGIC CORPORATION

FORM 10-Q/A

INDEX



|                              |  |                                                                                                            |  |      
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------- |  | -----
|                              |  |                                                                                                            |  | PAGE 
|PART I.
FINANCIAL INFORMATION |  |                                                                                                           
|                              |  |                                                                                                           
|Item 1.                       |  | Financial Statements:                                                                                      |  |      
|                              |  |                                                                                                           
|                              |  | Unaudited Condensed Consolidated Statements of OperationsThree months ended April 30, 2006 and May 1, 2005 |  | 4    
|                              |  |                                                                                                           
|                              |  | Condensed Consolidated Balance SheetsApril 30, 2006 (unaudited) and January 29, 2006                       |  | 5    
|                              |  |                                                                                                           
|                              |  | Unaudited Condensed Consolidated Statements of Cash FlowsThree months ended April 30, 2006 and May 1, 2005 |  | 6    
|                              |  |                                                                                                           
|                              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                             |  | 7-15 
|                              |  |                                                                                                           
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                      |  | 16-23
|                              |  |                                                                                                           
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                 |  | 23   
|                              |  |                                                                                                           
|Item 4.                       |  | Controls and Procedures                                                                                    |  | 23-24
|                              | 
|PART II.
OTHER INFORMATION    |  |                                                                                                           
|                              |  |                                                                                                           
|Item 1A.                      |  | Risk Factors                                                                                               |  | 24-32
|                              |  |                                                                                                           
|Item 6.                       |  | Exhibits                                                                                                   |  | 32-33
|                              | 
|Signatures                    |  | 34                                                                                                        
|                              | 
|Certifications                |  |                                                                                                           



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Part I. Financial Information

Item I. Financial Statements

NEOMAGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                    |               |                                      |        |            |  |   |        |  
|----------------------------------------------------------------------------------- | ------------- | ------------------------------------ | ------ | ---------- |  | - | ------ | -
|                                                                                    |               | Three Months Ended                   |       
|                                                                                    | April 30,2006 |                                      |        | May 1,2005 | 
|                                                                                    |               | (In thousands, exceptper share data) |       
|Net product revenue                                                                 |               | $                                    | 86     |            |  | $ | 299    |  
|Licensing revenue                                                                   |               |                                      |       |            |  |   |       |  
|                                                                                    |               |                                      |        |            |  |   |        |  
|Total revenue                                                                       |               |                                      | 86     |            |  |   | 299    |  
|                                                                                    |               |                                     
|Cost of product revenue (1)                                                         |               |                                      | 86     |            |  |   | 332    |  
|Cost of licensing revenue                                                           |               |                                      |       |            |  |   |       |  
|                                                                                    |               |                                      |        |            |  |   |        |  
|Total cost of revenue                                                               |               |                                      | 86     |            |  |   | 332    |  
|                                                                                    |               |                                     
|Gross margin (loss)                                                                 |               |                                      |       |            |  |   | (33    | )
|                                                                                    |               |                                     
|Operating expenses:                                                                 |               |                                      |        |            |  |   |        |  
|Research and development (2)                                                        |               |                                      | 3,284  |            |  |   | 3,083  |  
|Sales, general and administrative (3)                                               |               |                                      | 1,940  |            |  |   | 1,790  |  
|Gain on sale of patents                                                             |               |                                      |       |            |  |   | (3,481 | )
|                                                                                    |               |                                      |        |            |  |   |        |  
|Total operating expenses                                                            |               |                                      | 5,224  |            |  |   | 1,392  |  
|                                                                                    |               |                                      |        |            |  |   |        |  
|Loss from operations                                                                |               |                                      | (5,224 | )          |  |   | (1,425 | )
|                                                                                    |               |                                     
|Other income (expense), net:                                                        |               |                                      |        |            |  |   |        |  
|Interest income and other                                                           |               |                                      | 270    |            |  |   | 117    |  
|Interest expense                                                                    |               |                                      | (37    | )          |  |   | (288   | )
|                                                                                    |               |                                      |        |            |  |   |        |  
|Loss before income taxes                                                            |               |                                      | (4,991 | )          |  |   | (1,596 | )
|                                                                                    |               |                                     
|Income tax provision                                                                |               |                                      | 16     |            |  |   | 49     |  
|                                                                                    |               |                                      |        |            |  |   |        |  
|Net loss                                                                            |               | $                                    | (5,007 | )          |  | $ | (1,645 | )
|                                                                                    |               |                                      |        |            |  |   |        |  
|Basic and diluted net loss per share                                                |               | $                                    | (.53   | )          |  | $ | (.25   | )
|                                                                                    |               |                                     
|Weighted average common shares outstanding for basic and diluted net loss per share |               |                                      | 9,521  |            |  |   | 6,647  |  

---

|(1) | Includes $3 in stock based compensation for the three months ended April 30, 2006 and $(3) in recovery of deferred stock compensation for the three months ended May 1,
2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes $201 in stock based compensation for the three months ended April 30, 2006 and $71 in amortization of deferred stock compensation for the three months ended
May 1, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes $108 in stock based compensation for the three months ended April 30, 2006 and $29 in amortization of deferred stock compensation for the three months ended
May 1, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to condensed consolidated financial statements.



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NEOMAGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                             |  |                  |         |   |                       |   |         |  
|-------------------------------------------- |  | ---------------- | ------- | - | --------------------- | - | ------- | -
|                                             |  | April 30,2006(2) |         |   | January 29,2006(1)(2) |  
|ASSETS                                       |  |                  |         |   |                       |   |         |  
|                                             |  | (In thousands)   |        
|                                             |  |                 
|Current assets:                              |  |                  |         |   |                       |   |         |  
|Cash and cash equivalents                    |  | $                | 21,235  |   |                       | $ | 26,695  |  
|Short-term investments                       |  |                  | 513     |   |                       |   |        |  
|Accounts receivable, net                     |  |                  | 7       |   |                       |   | 9       |  
|Inventory                                    |  |                  | 152     |   |                       |   | 171     |  
|Prepaid and other current assets             |  |                  | 1,039   |   |                       |   | 800     |  
|                                             |  |                  |         |   |                       |   |         |  
|Total current assets                         |  |                  | 22,946  |   |                       |   | 27,675  |  
|                                             |  |                 
|Property, plant and equipment, net           |  |                  | 1,994   |   |                       |   | 2,368   |  
|Long-term prepaid assets                     |  |                  |        |   |                       |   | 36      |  
|Other assets                                 |  |                  | 414     |   |                       |   | 415     |  
|                                             |  |                  |         |   |                       |   |         |  
|Total assets                                 |  | $                | 25,354  |   |                       | $ | 30,494  |  
|                                             |  |                  |         |   |                       |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY         |  |                  |         |   |                       |   |         |  
|                                             |  |                 
|Current liabilities:                         |  |                  |         |   |                       |   |         |  
|Accounts payable                             |  | $                | 1,184   |   |                       | $ | 1,735   |  
|Compensation and related benefits            |  |                  | 1,260   |   |                       |   | 1,024   |  
|Income taxes payable                         |  |                  | 1,065   |   |                       |   | 1,059   |  
|Current portion of capital lease obligations |  |                  | 1,637   |   |                       |   | 1,525   |  
|Other accruals                               |  |                  | 228     |   |                       |   | 264     |  
|                                             |  |                  |         |   |                       |   |         |  
|Total current liabilities                    |  |                  | 5,374   |   |                       |   | 5,607   |  
|                                             |  |                 
|Capital lease obligations                    |  |                  | 407     |   |                       |   | 624     |  
|Other long-term liabilities                  |  |                  | 145     |   |                       |   | 149     |  
|                                             |  |                 
|Commitments and contingencies                |  |                  |         |   |                       |   |         |  
|                                             |  |                 
|Stockholders equity:                        |  |                  |         |   |                       |   |         |  
|Common stock                                 |  |                  | 36      |   |                       |   | 36      |  
|Additional paid-in capital                   |  |                  | 110,091 |   |                       |   | 110,302 |  
|Deferred compensation                        |  |                  |        |   |                       |   | (531    | )
|Accumulated other comprehensive loss         |  |                  | (1      | ) |                       |   | (2      | )
|Accumulated deficit                          |  |                  | (90,698 | ) |                       |   | (85,691 | )
|                                             |  |                  |         |   |                       |   |         |  
|Total stockholders equity                   |  |                  | 19,428  |   |                       |   | 24,114  |  
|                                             |  |                  |         |   |                       |   |         |  
|Total liabilities and stockholders equity   |  | $                | 25,354  |   |                       | $ | 30,494  |  
|                                             |  |                  |         |   |                       |   |         |  

---

|(1) | Derived from the January 29, 2006 audited consolidated financial statements included in the Annual Report on Form 10-K/A of NeoMagic Corporation for fiscal year 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Certain items previously reported have been reclassified.
|--- | ---------------------------------------------------------

See accompanying notes to condensed consolidated financial statements.



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NEOMAGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                             |               |                    |         |            |  |   |         |  
|---------------------------------------------------------------------------- | ------------- | ------------------ | ------- | ---------- |  | - | ------- | -
|                                                                             |               | Three Months Ended |        
|                                                                             | April 30,2006 |                    |         | May 1,2005 | 
|                                                                             |               | (In thousands)     |        
|Operating activities:                                                        |               |                    |         |            |  |   |         |  
|Net loss                                                                     |               | $                  | (5,007  | )          |  | $ | (1,645  | )
|Adjustments to reconcile net loss to net cash used for operating activities: |               |                    |         |            |  |   |         |  
|Depreciation                                                                 |               |                    | 405     |            |  |   | 434     |  
|Amortization and accretion                                                   |               |                    |        |            |  |   | 197     |  
|Stock-based compensation                                                     |               |                    | 312     |            |  |   | 97      |  
|Gain on sale of patents                                                      |               |                    |        |            |  |   | (3,481  | )
|Changes in operating assets and liabilities:                                 |               |                    |         |            |  |   |         |  
|Accounts receivable                                                          |               |                    | 2       |            |  |   | (43     | )
|Inventory                                                                    |               |                    | 19      |            |  |   | 148     |  
|Other current assets                                                         |               |                    | (239    | )          |  |   | (82     | )
|Long term prepaid and other assets                                           |               |                    | 37      |            |  |   | 86      |  
|Accounts payable                                                             |               |                    | (551    | )          |  |   | (80     | )
|Compensation and related benefits                                            |               |                    | 236     |            |  |   | 282     |  
|Income taxes payable                                                         |               |                    | 6       |            |  |   | 44      |  
|Other accruals                                                               |               |                    | (40     | )          |  |   | (1      | )
|                                                                             |               |                    |         |            |  |   |         |  
|Net cash used in operating activities                                        |               |                    | (4,820  | )          |  |   | (4,044  | )
|                                                                             |               |                    |         |            |  |   |         |  
|Investing activities:                                                        |               |                    |         |            |  |   |         |  
|Purchases of property, plant, equipment and intangibles                      |               |                    | (31     | )          |  |   | (24     | )
|Proceeds from sale of patents                                                |               |                    |        |            |  |   | 3,481   |  
|Purchases of short-term investments                                          |               |                    | (31,085 | )          |  |   | (10,097 | )
|Maturities of short-term investments                                         |               |                    | 30,573  |            |  |   | 17,808  |  
|                                                                             |               |                    |         |            |  |   |         |  
|Net cash provided by (used in) investing activities                          |               |                    | (543    | )          |  |   | 11,168  |  
|                                                                             |               |                    |         |            |  |   |         |  
|Financing activities:                                                        |               |                    |         |            |  |   |         |  
|Payments on capital lease obligations                                        |               |                    | (105    | )          |  |   | (395    | )
|Net proceeds from issuance of common stock                                   |               |                    | 8       |            |  |   | 4       |  
|                                                                             |               |                    |         |            |  |   |         |  
|Net used in financing activities                                             |               |                    | (97     | )          |  |   | (391    | )
|                                                                             |               |                    |         |            |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                         |               |                    | (5,460  | )          |  |   | 6,733   |  
|Cash and cash equivalents at beginning of period                             |               |                    | 26,695  |            |  |   | 8,944   |  
|                                                                             |               |                    |         |            |  |   |         |  
|Cash and cash equivalents at end of period                                   |               | $                  | 21,235  |            |  | $ | 15,677  |  
|                                                                             |               |                    |         |            |  |   |         |  
|Supplemental schedules of cash flow information:                             |               |                    |         |            |  |   |         |  
|Cash paid during the period for:                                             |               |                    |         |            |  |   |         |  
|Interest                                                                     |               | $                  | 16      |            |  | $ | 71      |  
|Taxes                                                                        |               | $                  | 9       |            |  | $ | 5       |  

See accompanying notes to condensed consolidated financial statements.



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NEOMAGIC CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission and include the accounts of NeoMagic Corporation and its wholly owned subsidiaries (collectively NeoMagic or the Company). Certain information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, the financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial position at April 30, 2006, and the operating results and cash flows for the three months ended April 30, 2006 and May 1, 2005. These financial statements and
notes should be read in conjunction with the Companys audited financial statements and notes thereto for the year ended January 29, 2006, included in the Companys Form 10-K/A filed with the Securities and Exchange Commission.

The results of operations for the three months ended April 30, 2006 are not necessarily indicative of the results that may be
expected for the year ending January 28, 2007.

The first fiscal quarters of 2007 and 2006 ended on April 30, 2006 and
May 1, 2005, respectively. The Companys quarters generally have 13 weeks. The Companys fiscal years generally have 52 weeks.

2.
Stock-Based Compensation

During the quarter ended April 30, 2006, the Company had several stock-based employee compensation plans,
including stock option plans and an employee stock purchase plan. Stock options may be issued to directors, officers, employees and consultants (Service Providers) under the Companys 2003 Stock Option Plan, Amended 1998 Stock
Option Plan, and 1993 Stock Option Plan. The stock options generally vest over a four-year period, have a maturity of ten years from the issuance date, and an exercise prices equal to the closing price on the NASDAQ of the common stock on the date
of grant. Generally, unvested options are forfeited thirty to ninety days from the date a Service Provider ceases to be an employee, or in the case of death or disability for a period of up to twelve months. To cover the exercise of vested options,
the Company issues new shares from its authorized but unissued share pool. At April 30, 2006, approximately 1,129,568, 1,237,469, and 136,601 shares of the Companys common stock were reserved for issuance under the 2003 Stock Option Plan,
Amended 1998 Stock Option Plan, and 1993 Stock Option Plan, respectively.

The 1997 Employee Stock Purchase Plan (ESPP) permits
eligible employees to purchase common stock through payroll deductions of up to 10% of the employees compensation. The price of common stock to be purchased under ESPP is 85% of the lower of the fair market value of the common stock at the
beginning of the offering period or at the end of the relevant purchase period. To cover the exercise of vested options the Company issues new shares from its authorized but unissued share pool. A total of 979,402 shares of the Companys
registered common stock were reserved for issuance under the 1997 Employee Stock Purchase Plan. At April 30, 2006, 353,735 shares were available for future purchase under the Purchase Plan.

Adoption of SFAS No. 123(R)

Effective
January 30, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R), which requires the Company to measure the cost of employee services received in exchange
for all equity awards granted under its stock option plans and employee stock purchase plans based on the fair market value of the award as of the grant date. SFAS



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123R supersedes Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation and
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). The Company has adopted SFAS 123R using the modified prospective application method of adoption that requires the Company to record
compensation cost related to unvested stock awards as of January 30, 2006 by recognizing the unamortized grant date fair value of these awards over the remaining service periods of those awards with no change in historical reported earnings.
Awards granted after January 29, 2006 are valued at fair value in accordance with provisions of SFAS 123R and recognized on a ratable basis over the service periods of each award. The Company estimated forfeiture rates for the first quarter of
2007 based on its historical experience.

Prior to fiscal year 2007, the Company accounted for stock-based compensation in accordance with
APB 25 using the intrinsic value method, which did not require that compensation cost be recognized for the Companys stock awards provided the exercise price was established at 100% of the common stock fair market value on the date of grant.
Prior to fiscal year 2007, the Company provided pro forma disclosure amounts in accordance with SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure (SFAS No. 148), as if the fair value method
defined by SFAS No. 123 had been applied to its stock-based compensation.

As a result of adopting SFAS 123R, the Company recognized
stock-based compensation expense for the three months ended April 30, 2006 of $312 thousand, which consisted of stock-based compensation expense related to Service Provider stock options and Employee Stock Purchase Plan of $230 thousand and $82
thousand, respectively. Stock-based compensation expense relating to consultants and the amortization of deferred stock compensation for options issued with an exercise price less than the fair market value on date of grant was $97 thousand for the
three months ended May 1, 2005. The impact on both basic and diluted loss per share for the three months ended April 30, 2006 was $(0.03).

Net cash proceeds from the sales of common stock under employee stock purchase and stock option plans were $8 thousand and $4 thousand for the three months ended April 30, 2006 and May 1, 2005, respectively. No income tax benefit was
realized from the sales of common stock under employee stock purchase and stock option plans during the three months ended April 30, 2006 and May 1, 2005, respectively. In accordance with SFAS 123(R), the Company presents excess tax
benefits from the exercise of stock options, if any, as financing cash flows rather than operating cash flows.

Determining Fair Value

Valuation and amortization method  The Company estimates the fair value using a Black-Scholes option pricing formula and a single option
award approach. This fair value is then amortized ratably over the requisite service periods of the awards, which is generally the vesting period.

Expected term  The Companys expected term represents the period that the Companys stock-based awards are expected to be outstanding. The Company has applied the provisions of SAB 107 in its adoption of SFAS 123 by
calculating the expected term as the average of the vesting period and original contractual term. This method may be used until December 31, 2007 for plain-vanilla share options. The Company believes that this method meets the
requirements for FAS 123R. The Company further intends to complete a historical review of Expected Term during its second fiscal quarter 2007.

Expected Volatility  The Companys expected volatility for the quarter ended April 30, 2006 is computed based on Companys historical volatility. The Company believes historical volatility to be the best estimate
of future volatility and noted no unusual events that might indicate that historical volatility would not be representative of future volatility.

Risk-Free Interest Rate  The risk-free interest rate used in the Black-Scholes option valuation method is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the
expected term of the option.

Expected Dividend  The dividend yield reflects that the Company has not paid any dividends and
has no intention to pay dividends in the foreseeable future.



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##### Table of Contents

Estimated Forfeiture  The estimated forfeiture rate was based on an analysis of the
Companys historical forfeiture rates. The estimated average forfeiture rate for the three months ended April 30, 2006 was 18.75% based on historical forfeiture experience.

In the three months ended April 30, 2006 and May 1, 2005, respectively, the fair value of each option grant was estimated on the date of grant using
the Black-Scholes option valuation model and the ratable attribution approach using a dividend yield of 0% and the following weighted average assumptions:



|                                 |  |                   |   |  |                     |   |  |               |   |  |               |  
|-------------------------------- |  | ----------------- | - |  | ------------------- | - |  | ------------- | - |  | ------------- | -
|                                 |  | Option Plans      |   |  | Stock Purchase Plan |  
|                                 |  | Three MonthsEnded |   |  | Three MonthsEnded   |  
|                                 |  | April 30,2006     |   |  | May 1,2005(1)       |   |  | April 30,2006 |   |  | May 1,2005(1) |  
|Risk-free interest rates         |  | 4.89              | % |  | 4.0                 | % |  | 4.36          | % |  | 3.32          | %
|Volatility                       |  | .97               |   |  | .77                 |   |  | 1.32          |   |  | .85           |  
|Expected life of option in years |  | 6.25              |   |  | 5.0                 |   |  | .50           |   |  | .50           |  

---

|(1) | Assumptions used in the calculation of pro forma net loss.
|--- | ----------------------------------------------------------

Stock Compensation Expense

The following table shows total stock-based compensation expense included in the accompanying Consolidated
Condensed Financial Statements for the three months ended April 30, 2006.



|                                    |  |   |    
|----------------------------------- |  | - | ---
|Cost of revenue                     |  | $ | 3  
|Research and development            |  |   | 201
|Selling, general and administrative |  |   | 108
|Income tax benefit                  |  |   |   
|                                    |  |   |    
|Total                               |  | $ | 312
|                                    |  |   |    

At April 30, 2006, the total compensation cost related to unvested stock-based awards granted
to employees under the stock option plans but not yet recognized was approximately $1.1 million, after estimated forfeitures. The cost will be recognized on a straight-line basis over an estimated weighted average period of approximately 1.41 years
for stock options and will be adjusted if necessary in subsequent periods if actual forfeitures differ from those estimates.

At
April 30, 2006, the total compensation cost related to options to purchase common shares under the ESPP but not yet recognized was approximately $195,000. This cost will be recognized on a straight-line basis over a weighted-average period of
approximately 1.75 years.

Stock Options and Awards Activities

The following is a summary of the Companys stock option activity under the stock option plans as of April 30, 2006 and related information:



|                                              |  |           |   |  |                                            |       |                                                    |      |                                        |   |      
|--------------------------------------------- |  | --------- | - |  | ------------------------------------------ | ----- | -------------------------------------------------- | ---- | -------------------------------------- | - | -----
|                                              |  | Shares    |   |  | Weighted AverageExercise Price (per share) |       | WeightedAverageRemainingContractualTerm (in Years) |      | AggregateIntrinsicValue (in thousands)
|Outstanding at January 29, 2006               |  | 1,822,098 |   |  | $                                          | 8.52  |                                                    |      |                                        |   |      
|Granted                                       |  | 13,160    |   |  | $                                          | 6.14  |                                                    |      |                                        |   |      
|Exercised                                     |  | (8,030    | ) |  | $                                          | 1.69  |                                                    |      |                                        |   |      
|Forfeitures and cancellations                 |  | (351,227  | ) |  | $                                          | 13.03 |                                                    |      |                                        |   |      
|                                              |  |           |   | 
|Outstanding at April 30, 2006                 |  | 1,476,001 |   |  | $                                          | 7.47  |                                                    | 7.07 |                                        | $ | 1,597
|                                              |  |           |   | 
|Vested and Expected to Vest at April 30, 2006 |  | 1,323,232 |   |  | $                                          | 8.03  |                                                    | 7.00 |                                        | $ | 1,306
|                                              |  |           |   | 
|Exercisable at April 30, 2006                 |  | 839,081   |   |  | $                                          | 11.23 |                                                    | 6.46 |                                        | $ | 328  



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The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on
the Companys closing stock price of $4.38 per share at April 30, 2006, which would have been received by option holders had all option holders exercised their options that were in-the-money as of that date. The total number of
in-the-money options exercisable as of April 30, 2006 was approximately 140 thousand shares. The aggregate intrinsic value of options exercised during the three months ended April 30, 2006 was $34 thousand.

The exercise prices for options outstanding and exercisable as of April 30, 2006 and their weighted average remaining contractual lives were as
follows:



|                         |  |                   |  |                                         |  |                              |       |                   |     |                              |   |      
|------------------------ |  | ----------------- |  | --------------------------------------- |  | ---------------------------- | ----- | ----------------- | --- | ---------------------------- | - | -----
|                         |  | Outstanding       |  | Exercisable                            
|Range of Exercise Prices |  | SharesOutstanding |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |       | NumberExercisable |     | WeightedAverageExercisePrice
|(per share)              |  | (in thousands)    |  | (in years)                              |  | (per share)                  |       | (in thousands)    |     | (per share)                 
|$1.35  2.00             |  | 141               |  | 4.41                                    |  | $                            | 1.50  |                   | 38  |                              | $ | 1.37 
|$2.01  4.02             |  | 545               |  | 8.74                                    |  | $                            | 2.20  |                   | 100 |                              | $ | 2.26 
|$4.03  6.00             |  | 170               |  | 6.26                                    |  | $                            | 4.99  |                   | 89  |                              | $ | 4.90 
|$6.01  13.95            |  | 320               |  | 7.27                                    |  | $                            | 11.92 |                   | 312 |                              | $ | 12.05
|$13.96  20.00           |  | 276               |  | 4.37                                    |  | $                            | 15.83 |                   | 276 |                              | $ | 15.83
|$20.01 and over          |  | 24                |  | 7.42                                    |  | $                            | 24.37 |                   | 24  |                              | $ | 24.37
|                         |  |                   |  |                                         |  |                              |       |                   |     |                              |   |      
|                         |  | 1,476             |  | 7.07                                    |  | $                            | 7.47  |                   | 839 |                              | $ | 11.23
|                         |  |                   |  |                                         |  |                              |       |                   |     |                              |   |      

Pro-forma Disclosures

The following table illustrates the effect on net loss and net loss per share as if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation during the three-month period
ended May 1, 2005 (in thousands, except per share amounts):



|                                                                                                                       |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------- |  | - | ------ | -
|Net loss  as reported                                                                                                 |  | $ | (1,645 | )
|Stock-based employee compensation benefit included in the determination of net loss as reported                        |  |   | 97     |  
|Stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes |  |   | (857   | )
|                                                                                                                       |  |   |        |  
|Pro forma net loss                                                                                                     |  | $ | (2,405 | )
|                                                                                                                       |  |   |        |  
|Loss per share:                                                                                                        |  |   |        |  
|Reported basic and diluted loss per share                                                                              |  | $ | (0.25  | )
|Pro forma basic and diluted loss per share                                                                             |  | $ | (0.36  | )

For the purposes of this pro forma disclosure, the value of the options was estimated using a
Black-Scholes option valuation model and recognized over the respective vesting periods of the awards.



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3. Loss Per Share

The following data shows the amounts used in computing loss per share and the effect on the weighted-average number of shares of diluted potential common stock.



|                                                                           |  |                                     |        |   |            |   |        |  
|-------------------------------------------------------------------------- |  | ----------------------------------- | ------ | - | ---------- | - | ------ | -
|                                                                           |  | Three Months Ended                  |       
|                                                                           |  | April 30,2006                       |        |   | May 1,2005 |  
|                                                                           |  | (in thousands exceptper share data) |       
|Numerator:                                                                 |  |                                     |        |   |            |   |        |  
|Net loss                                                                   |  | $                                   | (5,007 | ) |            | $ | (1,645 | )
|                                                                           |  |                                     |        |   |            |   |        |  
|Denominator:                                                               |  |                                     |        |   |            |   |        |  
|Denominator for basic and diluted loss per share - weighted-average shares |  |                                     | 9,521  |   |            |   | 6,647  |  
|                                                                           |  |                                     |        |   |            |   |        |  
|Basic and diluted loss per share                                           |  | $                                   | (.53   | ) |            | $ | (.25   | )
|                                                                           |  |                                     |        |   |            |   |        |  

For the three months ended April 30, 2006 and May 1, 2005, respectively, basic loss per share
equals diluted loss per share due to the net loss for the quarter. During the three months ended April 30, 2006 and May 1, 2005, the Company excluded from the computation of basic and diluted loss per share options to purchase 2,031,734 and
2,628,943 shares of common stock, respectively, because the effect would be anti-dilutive.

4. Cash, Cash Equivalents and Short-term Investments

All highly liquid investments purchased with an original maturity of 90 days or less are considered cash equivalents. Investments with
an original maturity of greater than 90 days, but less than one year, are classified as short-term investments.

Investments in marketable
equity securities and debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost with corresponding premiums or
discounts amortized to interest income over the life of the investment. Securities not classified as held-to-maturity are classified as available-for-sale and are reported at fair market value. Unrealized gains or losses on available-for-sale
securities are included, net of tax, in stockholders equity until their disposition. Realized gains and losses and declines in value judged to be other than temporary on available-for-sale securities are included in interest income and other.
The cost of securities sold is based on the specific identification method.

All cash equivalents and short-term investments are classified
as available-for-sale and are recorded at fair market value. All available-for-sale securities have maturity dates of less than one year from the balance sheet dates. For all classifications of securities, cost approximates fair market value as of
April 30, 2006 and January 29, 2006, and consists of the following (in thousands):



|                           |  |               |        |                     |   |    |           |  |   |       
|-------------------------- |  | ------------- | ------ | ------------------- | - | -- | --------- |  | - | ------
|April 30, 2006 (unaudited) |  | AmortizedCost |        | GrossUnrealizedLoss |   |    | FairValue
|Cash and cash equivalents: |  |               |        |                     |   |    |           |  |   |       
|Money market funds         |  | $             | 352    |                     | $ |   |           |  | $ | 352   
|Commercial paper           |  |               | 20,435 |                     |   |   |           |  |   | 20,435
|Bank accounts              |  |               | 448    |                     |   |   |           |  |   | 448   
|                           |  |               |        |                     |   |    |           |  |   |       
|Total                      |  | $             | 21,235 |                     | $ |   |           |  | $ | 21,235
|                           |  |               |        |                     |   |    |           |  |   |       
|Short-term investments:    |  |               |        |                     |   |    |           |  |   |       
|U.S. government agencies   |  | $             | 514    |                     | $ | (1 | )         |  | $ | 513   
|                           |  |               |        |                     |   |    |           |  |   |       
|Total                      |  | $             | 514    |                     | $ | (1 | )         |  | $ | 513   
|                           |  |               |        |                     |   |    |           |  |   |       



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|                           |  |               |        |                     |   |    |           |  |   |       
|-------------------------- |  | ------------- | ------ | ------------------- | - | -- | --------- |  | - | ------
|January 29, 2006           |  | AmortizedCost |        | GrossUnrealizedLoss |   |    | FairValue
|Cash and cash equivalents: |  |               |        |                     |   |    |           |  |   |       
|Money market funds         |  | $             | 1,345  |                     | $ |   |           |  | $ | 1,345 
|Commercial paper           |  |               | 23,698 |                     |   | (2 | )         |  |   | 23,696
|U.S. government agencies   |  |               | 994    |                     |   |    |           |  |   | 994   
|Bank accounts              |  |               | 660    |                     |   |   |           |  |   | 660   
|                           |  |               |        |                     |   |    |           |  |   |       
|Total                      |  | $             | 26,697 |                     | $ | (2 | )         |  | $ | 26,695
|                           |  |               |        |                     |   |    |           |  |   |       

5. Inventories

Inventories are stated at the lower of cost or market value. Cost is determined by the first-in, first-out method. The Company writes down the inventory value for estimated excess and obsolete inventory, based on
managements assessment of future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required.



|                       |  |                |     |                  |   |    
|---------------------- |  | -------------- | --- | ---------------- | - | ---
|Inventory consists of: |  | April 30, 2006 |     | January 29, 2006
|(in thousands)         |  | (unaudited)    |     |                 
|Raw materials          |  | $              | 1   |                  | $ | 1  
|Work in process        |  |                |    |                  |   | 11 
|Finished goods         |  |                | 151 |                  |   | 159
|                       |  |                |     |                  |   |    
|Total                  |  | $              | 152 |                  | $ | 171
|                       |  |                |     |                  |   |    

6. Accumulated Other Comprehensive Loss

Unrealized gains or losses on the Companys available-for-sale securities are included in comprehensive loss and reported separately in
stockholders equity.

Net comprehensive loss includes the Companys net loss, as well as accumulated other comprehensive loss on
available-for-sale securities. Net comprehensive loss for the three months ended April 30, 2006 and May 1, 2005, respectively, is as follows (in thousands):



|                                                               |  |                    |        |   |            |   |        |  
|-------------------------------------------------------------- |  | ------------------ | ------ | - | ---------- | - | ------ | -
|                                                               |  | Three months ended |       
|                                                               |  | April 30, 2006     |        |   | May 1,2005 |  
|Net loss                                                       |  | $                  | (5,007 | ) |            | $ | (1,645 | )
|Net change in unrealized loss on available for sale securities |  |                    | 1      |   |            |   | 10     |  
|                                                               |  |                    |        |   |            |   |        |  
|Net comprehensive loss                                         |  | $                  | (5,006 | ) |            | $ | (1,635 | )
|                                                               |  |                    |        |   |            |   |        |  

Total accumulated other comprehensive loss was $1,000 and $2,000 at April 30, 2006 and
January 29, 2006, respectively. Accumulated other comprehensive loss consists entirely of unrealized losses on available for sale securities.

7.
Obligations Under Capital Leases

In fiscal 2003, the Company entered into capital leases for software licenses used in the design of
semiconductors. In March 2004 and October 2004, the Company entered into new capital lease agreements adding additional software and extending the terms of two of the Companys existing leases. Obligations under capital leases represent the
present value of future payments under the lease agreements. Property, plant and equipment include the following amounts for leases that have been capitalized:



|                                 |  |               |        |   |                 |   |        |  
|-------------------------------- |  | ------------- | ------ | - | --------------- | - | ------ | -
|(in thousands)                   |  | April 30,2006 |        |   | January 29,2006 |  
|                                 |  | (unaudited)   |        |   |                 |  
|Software under capital lease     |  | $             | 4,243  |   |                 | $ | 4,243  |  
|Accumulated amortization         |  |               | (2,573 | ) |                 |   | (2,229 | )
|                                 |  |               |        |   |                 |   |        |  
|Net software under capital lease |  | $             | 1,670  |   |                 | $ | 2,014  |  
|                                 |  |               |        |   |                 |   |        |  



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Amounts capitalized under leases are being amortized over a three-year period.

Future minimum payments under the capital leases consist of the following, as of April 30, 2006:



|                                            |  |   |        |  
|------------------------------------------- |  | - | ------ | -
|(in thousands)                              |  |   |       
|Fiscal 2007                                 |  | $ | 1,528  |  
|Fiscal 2008                                 |  |   | 643    |  
|                                            |  |   |        |  
|Total minimum lease payments                |  |   | 2,171  |  
|Less: amount representing interest          |  |   | (127   | )
|                                            |  |   |        |  
|Present value of net minimum lease payments |  |   | 2,044  |  
|Less: current portion                       |  |   | (1,637 | )
|                                            |  |   |        |  
|Long-term portion                           |  | $ | 407    |  
|                                            |  |   |        |  

8. Equity Financing

On December 16, 2005, NeoMagic closed the sale and issuance of (i) 1,500,000 shares of its Common Stock, $.001 par value (the Shares), and (ii) warrants to purchase 749,996 shares of Common
Stock at an exercise price of $9.00 per share (the Warrants). The Company sold and issued the Shares and the Warrants for an aggregate offering price of $9 million. After deducting offering costs, net cash proceeds received by the
Company were $8.4 million.

The Warrants provide that each holder of a Warrant may exercise its Warrant for shares of Common Stock at an
exercise price of $9.00 per share. The Warrants are not exercisable until June 16, 2006. The Warrants provide for adjustments to the exercise price and number of shares for which the Warrants may be exercised in certain circumstances, including
stock splits, stock dividends, certain distributions, reclassifications and, subject to a minimum price of $7.79 per share.

The proceeds
were allocated between the Shares and the Warrants based on their respective fair values. The Warrants were classified as equity in accordance with EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed to and Potentially
Settled in a Companys Own Stock (EITF 00-19). As both the Shares and Warrants are equity instruments, the proceeds from the issuance were allocated on the relative fair value method; however, the Company is aggregating them
for financial reporting purposes.

Investor agreements associated with the December 16, 2005 financing required NeoMagic to register
the Shares and the shares issuable upon exercise of the Warrants (the Warrant Shares) with the SEC for resale. The registration statement for the Shares and Warrant Shares was declared effective on January 25, 2006. The investor
agreements also require NeoMagic to maintain the effectiveness of the registration statement. If the registration statement does not remain effective, NeoMagic could be required to pay liquidated damages to investors that participated in the
December 16, 2005 financing, capped at a maximum of 12% of the subscription amount paid by the investors.



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##### Table of Contents

9. Gain on Patent Sale

On April 6, 2005, NeoMagic completed the sale of selected patents to Faust Communications, LLC, a private company, for net proceeds of approximately $3.5 million. The gross proceeds in the transaction were
approximately $4.5 million. Expenses include a commission payment to the Consortium for Technology Licensing, Ltd. of approximately $1.0 million. The patents sold relate to products no longer sold by NeoMagic and not to products that NeoMagic
currently sells or plans to sell. NeoMagic retains a worldwide, non-exclusive license under the patents sold.

The sale does not include
several of NeoMagics important patents covering embedded DRAM technology or any of the unique array processing technology used in NeoMagics MiMagic 6 product. During the patent sale negotiations, NeoMagic was represented by The
Consortium for Technology Licensing, Ltd., of Nissequogue, New York, a company whose CEO served on the board of NeoMagic until December 2004. On March 28, 2005 NeoMagic entered into an amended and restated Patent Licensing Agreement with the
Consortium for Technology Licensing, Ltd. governing the relationship between NeoMagic and The Consortium.

10. Income Taxes

Income tax expense was $16 thousand and $49 thousand for the three months ended April 30, 2006 and May 1, 2005, respectively. We recorded a tax
provision of $16 thousand on a pre-tax loss of $5.0 million in the three months ended April 30, 2006 that consisted of foreign income taxes and an increase of $6 thousand for accrued interest on tax liabilities. We recorded a tax provision of
$49 thousand on a pre-tax loss of $1.6 million in the three months ended May 1, 2005 that consisted of foreign income taxes and an increase of $44 thousand for accrued interest on tax liabilities.

11. Contingencies

Commitments

In May 1996, the Company moved its principal headquarters to a new facility in Santa Clara, California, under a non-cancelable operating lease that
expired in April 2003. In January 1998, the Company entered into a second non-cancelable operating lease for an adjacent building, which became its new corporate headquarters. This lease had a co-terminus provision with the original lease that
expired in April 2003. In March 2002, the Company extended the term for 45,000 square feet under this lease for another 7 years with a termination date of April 2010. The Company leases offices in Israel and India under operating leases that expire
September 2006 and December 2006, respectively. Future minimum lease payments under operating leases are as follows:



|                             |  |   |      
|---------------------------- |  | - | -----
|(in thousands)               |  |  
|Fiscal 2007*                 |  | $ | 744  
|Fiscal 2008*                 |  |   | 1,028
|Fiscal 2009                  |  |   | 1,073
|Fiscal 2010                  |  |   | 1,100
|Thereafter                   |  |   | 277  
|                             |  |   |      
|Total minimum lease payments |  | $ | 4,222
|                             |  |   |      

---

|* | Net of sublease income for sub-leasing 10,000 square feet in the Companys Santa Clara facility for a two-year period starting on March 15, 2005 for $12,000 per month.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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12. Product Warranty

The Company generally sells products with a limited warranty of product quality and a limited indemnification of customers against intellectual property infringement claims related to the Companys products. The
Company accrues for known warranty and indemnification issues if a loss is probable and can be reasonably estimated, and accrues for estimated but unidentified issues based on historical activity. The accrual and the related expense for known issues
were not significant as of and for the first quarter of fiscal years 2007 and 2006. Due to product testing, the short time between product shipment and the detection and correction of product failures, and a low historical rate of payments on
indemnification claims, the accrual based on historical activity and the related expense were not significant at April 30, 2006 and January 29, 2006.

13. Recent Accounting Pronouncements

In February 2006, the FASB issued Statement of Financial Accounting Standards
No. 155 (SFAS 155), Accounting for Certain Hybrid Financial Instruments which amends Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and
Hedging Activities and Statement of Financial Accounting Standards No. 140 (SFAS 140), Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 simplifies the
accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain
other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006. We do not expect the adoption of
SFAS 155 to have a material impact on our consolidated financial position, results of operations or cash flows.



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##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

When
used in this discussion, the words expects, anticipates, believes and similar expressions are intended to identify forward-looking statements. Such statements reflect managements current intentions and
expectations. Examples of such forward-looking statements include statements regarding future revenues, expenses, losses and cash flows, the launch of new products by NeoMagic and its customers and research and development activities. However,
actual events and results could vary significantly based on a variety of factors including those set forth below under Item 1A of Part II. These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein, to reflect any changes in the Companys expectations with regard thereto or any changes in events, conditions or
circumstances on which any such statement is based.

Overview

We deliver semiconductor chips and software that provide solutions to enable new multimedia applications for handheld devices. Our solutions offer low power consumption, small form-factor and high performance
processing. As part of our complete system solution, we deliver a suite of middleware and sample applications for imaging, video and audio functionality, and we provide multiple operating system ports with customized drivers for our products. Our
product portfolio includes semiconductor solutions known as Applications Processors as well as other Systems-On-Chips (SOCs). Our Applications Processors are sold under the MiMagic brand name with a focus on enabling high performance
multimedia within a low power consumption environment. In mobile phones, our Applications Processors are designed to work side-by-side with baseband processors that are used for communications functionality. Our SOC product dedicated for the mobile
digital TV market is marketed under the NeoMobileTV brand name. Target customers for both our MiMagic product and our NeoMobileTV product include manufacturers of mobile phones and handheld devices. The largest projected market
opportunity for our products is in the mobile phone market, where our products enable multimedia functionality.

Since April 2002, we have
been working with The Consortium for Technology Licensing Ltd. to explore opportunities to license or sell our patents. During the first quarter of fiscal year 2006, we generated a $3.5 million gain from the sale of patents that related to legacy
products that NeoMagic no longer sells. During the third quarter of fiscal year 2006, we announced a patent licensing transaction with Sony Corporation where Sony paid us $8.5 million for a non-exclusive fully paid-up license to all of our patents.
In the patent licensing transaction with Sony, we only provided Sony with a license to our patents. We did not provide Sony with any intellectual know-how or other confidential information that could help Sony develop products that could
be competitive with NeoMagics products. As of April 30, 2006, we were in discussions with multiple companies that we believe have infringed on our embedded DRAM patents. The objective of our patent licensing business is to enter into
patent licensing agreements with companies that have infringed or are expected to infringe on our patents. In addition, we may decide to license or sell certain additional patents in the future. Licensing revenue was $8.5 million in fiscal 2006
representing 91% of our total revenue. There was no licensing revenue in the first quarters of fiscal 2007 and fiscal 2006.

The
Companys fiscal year end is the last Sunday in January. The first fiscal quarters of 2007 and 2006 ended on April 30, 2006 and May 1, 2005, respectively. The Companys quarters generally have 13 weeks. The first quarters of
fiscal 2007 and fiscal 2006 had 13 weeks. The Companys fiscal years generally have 52 weeks.



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##### Table of Contents

Critical Accounting Policies and Estimates

NeoMagics discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to intangible assets and long-lived assets, revenue recognition, inventories and income
taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the amount and timing of revenue and
expenses and the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Accounting for Stock-Based Compensation

Beginning in fiscal 2007, we account for stock-based compensation arrangements in accordance with the provisions of SFAS 123(R). Under SFAS 123(R), compensation cost is calculated based on the fair value on the date of grant using the
Black-Scholes method. The compensation cost is then amortized on a straight-line basis over the vesting period. Black-Scholes requires us to estimate key assumptions such as expected term, volatility and forfeiture rates that determine the stock
options fair value. The estimate of these key assumptions is based on historical information and judgment regarding market factors and trends. If actual results are not consistent with our assumptions and judgments used in estimating the key
assumptions, we may be required to increase or decrease compensation expense or income tax expense, which could be material to our results of operations.

Long-Lived Assets

In accordance with SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, we evaluate the carrying value of our long-lived assets, consisting primarily of property, plant and equipment, in the fourth quarter of each fiscal year, and whenever certain events or changes in circumstances indicate that
the carrying amount of these assets may not be recoverable. Such events or circumstances include, but are not limited to, a significant decline in the market value of the assets, significant reductions in projected future cash flows or gross
margins, or macroeconomic factors, including a prolonged economic downturn. In assessing the recoverability of long-lived assets, we compare the carrying value to the undiscounted future cash flows that the assets are expected to generate. If the
total of the undiscounted future cash flows is less than the carrying amount of the assets, we will be required to write down such assets based on the excess of the carrying amount over the fair value of the assets. Fair value is generally
determined by calculating the discounted future cash flows using a discount rate based upon the weighted average cost of capital. Significant judgments and assumptions are required in the forecast of future operating results used in the preparation
of the estimated future cash flows, including gross profit margins, long-term forecasts of the amount and timing of overall market growth and our percentage of that market, groupings of assets, discount rates and terminal growth rates. In addition,
significant estimates and assumptions are required in the determination of the fair value of our tangible long-lived assets, including replacement cost, economic obsolescence, and the value that could be realized in liquidation. We continue to
periodically evaluate our long-lived assets for impairment in accordance with SFAS 144 and acknowledge it is possible that such evaluation might result in future adjustments for impairment. Changes in these estimates could have a material adverse
effect on the assessment of our long-lived assets, thereby requiring us to write down or write off long-lived assets.



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Revenue Recognition

We derive our revenue from two principal sources: product sales and license fees for patents.

We recognize
revenue from non-distributor product sales when the products are shipped to the customer, title has transferred, and no obligations remain. In addition, we require the following criteria to be met before recognizing revenue: (i) execution of a
written customer order, (ii) shipment of the product, (iii) fee is fixed or determinable, and (iv) collectibility of the proceeds is probable. Our shipment terms are FOB shipping point.

For products shipped to distributors, we defer recognition of product revenue until the distributors sell our products to their customers. On occasion,
however, we may sell products with End of Life status to our distributors under special arrangements without any price protection or return privileges for which we recognize revenue upon transfer of title, typically upon shipment.

At the end of each accounting period, we determine certain factors, including sales returns and allowances, that could affect the amount
of revenue recorded for the period. Sales returns provisions include considerations for known but unprocessed sales returns and estimates for unknown returns based on our historical experiences.

We recognize non-refundable fees for licensing our patents in the period when all of the following conditions are met: (i) we enter into a licensing
agreement with a licensee that has been executed by both parties, (ii) delivery has occurred and we have no further obligations regarding the licensing agreement, (iii) the fee is fixed and determinable, and (iv) collectibility of the
proceeds is probable.

Inventory Valuation

Our inventory valuation policy stipulates that at the end of each reporting period we write down or write off our inventory for estimated obsolescence or unmarketable inventory. The amount of the write-down or
write-off is equal to the difference between the cost of the inventory and the estimated market value of the inventory based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those
projected by management, additional inventory write-downs or write-offs may be required. Additionally, as we introduce product enhancements and new products, demand for our existing products in inventory may decrease, requiring additional inventory
write-downs.

Deferred Taxes and Tax Accruals

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. Based on the uncertainty of future pre-tax income, we have fully reserved our deferred tax
assets. If we determine that we would be able to realize some or all of our deferred tax assets in the future, an adjustment to the deferred tax assets would increase income in the period when such determination was made.

We have also provided accruals for certain tax liabilities based on our estimate of whether, and the extent to which, additional taxes will be due. If
payment of these amounts ultimately proves to be unnecessary, or less than currently assessed, the resulting reversal of such accruals would result in tax benefits being recorded in the period when the accruals are no longer deemed necessary.
Conversely, if our estimate of tax liabilities is more than the amount ultimately assessed, further charges would result.



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Results of Operations

Net Sales

Net sales were $86 thousand for the three months ended April 30, 2006, compared to
$299 thousand for the three months ended May 1, 2005. Net sales decreased primarily due to an $83 thousand decrease in shipments of our MiMagic 5 applications processor, a $50 thousand decrease in shipments of our MiMagic 3 applications
processor and a $61 thousand decrease in shipments of our NMC 1110 companion chips.

Product sales to customers located outside the United
States (including sales to the foreign operations of customers with headquarters in the United States, and foreign system manufacturers that sell to United States-based OEMs) accounted for 89% and 78% of product revenue in the three months ended
April 30, 2006 and May 1, 2005, respectively. We expect that export sales will continue to represent a significant portion of product revenue. All sales transactions were denominated in United States dollars. The following is a summary of
the Companys product revenue by major geographic area:



|              |  |                    |   |  |             |  
|------------- |  | ------------------ | - |  | ----------- | -
|              |  | Three Months Ended |  
|              |  | April 30, 2006     |   |  | May 1, 2005 |  
|Japan         |  | 1                  | % |  | 13          | %
|Taiwan        |  | 35                 | % |  | 21          | %
|United States |  | 11                 | % |  | 22          | %
|Singapore     |  | 27                 | % |  | 0           | %
|Sweden        |  | 0                  | % |  | 28          | %
|England       |  | 26                 | % |  | 16          | %
|              |  |                    |   |  |             |  
|              |  | 100                | % |  | 100         | %

The following customers accounted for more than 10% of product revenue:



|                                      |  |                    |   |  |             |  
|------------------------------------- |  | ------------------ | - |  | ----------- | -
|                                      |  | Three Months Ended |  
|                                      |  | April 30, 2006     |   |  | May 1, 2005 |  
|Edom Technology Co.**                 |  | 39                 | % |  | *           |  
|Inc. Technologies (P) PTE LTD         |  | 27                 | % |  | *           |  
|Premier Microelectronics Europe LTD** |  | 26                 | % |  | 16          | %
|Premier Components Distribution       |  | 11                 | % |  | *           |  
|Note Norrtelje AB                     |  | *                  |   |  | 28          | %
|Exadigm Inc.                          |  | *                  |   |  | 14          | %
|Silicon Alliance Int.**               |  | *                  |   |  | 13          | %

---

|* | represents less than 10% of net sales
|- | -------------------------------------

|** | customer is a distributor
|-- | -------------------------

Gross Loss

Gross loss was $0 thousand and $33 thousand for the three months ended April 30, 2006 and May 1, 2005, respectively. The improvement in gross
loss is primarily due to a decrease in the write-off of excess inventory of $85 thousand. The three months ended May 1, 2005 included the write-off of excess MiMagic 5 inventory of approximately $95 thousand. In addition, the gross loss for the
three months ended April 30, 2006 and May 1, 2005 was favorably impacted by the release of reserves of $22 thousand and $24 thousand, respectively, as a result of the sale of previously reserved inventory.



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Research and Development Expenses

Research and development expenses include compensation and associated costs relating to development personnel, amortization of intangible assets and
prototyping costs, which are comprised of photomask costs and pre-production wafer costs. Research and development expenses were $3.3 million and $3.1 million for the three months ended April 30, 2006 and May 1, 2005, respectively. These
expenses include stock based compensation of $201 thousand and $71 thousand for the three months ended April 30, 2006 and May 1, 2005, respectively. Research and development expenses increased in the first quarter of fiscal 2007 compared to the
first quarter of fiscal 2006 primarily due to increased stock compensation expense as a result of the adoption of SFAS 123 (R) in the first quarter of fiscal 2007.

Sales, General and Administrative Expenses

Sales, general and administrative expenses were $1.9
million and $1.8 million for the three months ended April 30, 2006 and May 1, 2005, respectively. These expenses include stock-based compensation of $108 thousand and $29 thousand for the three months ended April 30, 2006 and May 1, 2005,
respectively. Sales, general and administrative expenses increased in the first quarter of fiscal 2007 due to increased professional service costs of $100 thousand and due to increased stock compensation expense as a result of the adoption of SFAS
123 (R) in the first quarter of fiscal 2007. These expense increases were partially offset by lower non-stock based compensation costs.

Gain on Sale of Patents

On April 6, 2005, NeoMagic completed the sale of selected patents to Faust Communications,
LLC, a private company, for net proceeds of approximately $3.5 million. The gross proceeds in the transaction were approximately $4.5 million. Expenses included a commission payment of approximately $1.0 million. The patents sold related to products
no longer sold by NeoMagic and not to products that NeoMagic currently sells or plans to sell. NeoMagic retained a worldwide, non-exclusive license under the patents sold. The sale did not include several of NeoMagics important patents
covering embedded DRAM technology nor any of the unique array processing technology used in NeoMagics MiMagic 6+ and NeoMobileTV products.

During the patent sale negotiations, NeoMagic was represented by The Consortium for Technology Licensing, Ltd., of Nissequogue, New York, a company whose CEO served on the board of NeoMagic until December 2004. On March 28, 2005,
NeoMagic entered into an amended and restated Patent Licensing Agreement with the Consortium governing the relationship between the two parties.

There were no patent sales during the first quarter of fiscal 2007.

Stock Compensation

Stock compensation expense was $312 thousand and $97 thousand for the three months ended April 30, 2006 and May 1, 2005, respectively. Stock
compensation expense recorded in cost of revenues, research and development expenses and selling, general and administrative expenses for the three months ended April 30, 2006 is the amortization of the fair value of share-based payments made
to employees and members of our board of directors in the form of stock options and purchases under the employee stock purchase plan as we adopted the provision of SFAS No. 123 (R) on the fist day of fiscal 2007 (See Note 2). The fair
value of stock options granted and rights granted to purchase our common stock under the employee stock purchase plan is recognized as expense over the employee requisite service period.

We elected to adopt the modified prospective method as provided by SFAS No. 123 (R). Accordingly, for the three months ended April 30, 2006, we
accounted for stock compensation under SFAS



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No. 123(R), while for the three months ended May 1, 2005, we accounted for stock compensation under Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. In the three months ended May 1, 2005, under APB 25, we recorded amortization of deferred stock compensation of $97 thousand for deferred
compensation recorded for the difference between the fair value of common stock at the date of grant and the option exercise price. Under SFAS No. 123 (R), however, we recorded compensation expense for all share-based payments made to employees
based on the fair value at the date of the grant. Therefore, stock compensation for the three months ended April 30, 2006 was not comparable to the prior-year period.

Interest Income and Other

The
Company earns interest on its cash and short-term investments. Interest and other income was $0.3 million and $0.1 million for the three months ended April 30, 2006 and May 1, 2005, respectively. The increase is primarily due to increased
interest rates.

Interest Expense

Interest expense was $37 thousand and $288 thousand for the three months ended April 30, 2006 and May 1, 2005, respectively. The decrease in the first quarter of fiscal 2007 from the first quarter of fiscal 2006
is primarily due to accreted interest expense of $197 thousand recorded in the first quarter of fiscal 2006 related to our Mandatorily Redeemable Series B Convertible Preferred Stock issued in August 2004. In addition, we recorded $33 thousand of
interest expense in the first quarter of fiscal 2006 due to amortization of deferred financing costs related to our Mandatorily Redeemable Series B preferred stock. There was no accreted interest expense or amortization of deferred financing costs
in the first quarter of fiscal 2007 since the Mandatorily Redeemable Series B Convertible Preferred Stock was converted into common stock in the fourth quarter of fiscal 2006. Interest expense recorded in the first quarter of fiscal 2007 represents
interest on our capital leases (See Note 7).

Income Taxes

Income tax expense was $16 thousand and $49 thousand for the three months ended April 30, 2006 and May 1, 2005, respectively. We recorded a tax
provision of $16 thousand on a pre-tax loss of $5.0 million in the three months ended April 30, 2006 that consisted of foreign income taxes and an increase of $6 thousand for accrued interest on tax liabilities. We recorded a tax provision of
$49 thousand on a pre-tax loss of $1.6 million in the three months ended May 1, 2005 that consisted of foreign income taxes and an increase of $44 thousand for accrued interest on tax liabilities.

Liquidity and Capital Resources

The
Companys cash, cash equivalents and short-term investments decreased $5.0 million in the three months ended April 30, 2006 to $21.7 million from $26.7 million at January 29, 2006.

We believe our current cash, cash equivalents and short-term investments will satisfy our projected cash requirements through the end of fiscal 2007.
However, we expect we will need to raise additional capital to fund future operating activities beyond fiscal 2007. Beyond fiscal 2007, the adequacy of our resources will depend largely on our ability to complete additional financing and our success
in re-establishing profitable operations and positive operating cash flows. If we experience a material shortfall versus our plan for fiscal 2007, we expect to take all appropriate actions to ensure the continuing operation of our business and to
mitigate any negative impact on our cash position. We believe we can take actions to achieve further reductions in our operating expenses, if necessary. We also believe that we can take actions to generate cash by selling or licensing intellectual
property, seeking funding from strategic partners, and seeking further equity or debt financing from financial sources. There can be no assurance that additional financing will be available on acceptable terms or at all.



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Cash and cash equivalents used in operating activities for the three months ended April 30, 2006 was
$4.8 million, compared to $4.0 million of net cash used in operating activities for the three months ended May 1, 2005. The cash used in operating activities for the three months ended April 30, 2006 was primarily due to the net loss of
$5.0 million and decreases in accounts payable of $0.6 million partially offset by non-cash depreciation of $0.4 million and non-cash stock compensation of $0.3 million. The cash used in operating activities for the three months ended May 1,
2005 was primarily due to the net loss of $1.6 million and the $3.5 million gain on the sale of patents partially offset by non-cash depreciation of $0.4 million and non-cash accretion of $0.2 million.

Net cash used in investing activities for the three months ended April 30, 2006 was $0.5 million, compared to $11.2 million of net cash provided by
investing activities for the three months ended May 1, 2005. Net cash used in investing activities in the three months ended April 30, 2006 was primarily due to net purchases of short-term investments of $0.5 million. Net cash provided by
investing activities in the three months ended May 1, 2005 related primarily to net maturities of short-term investments of $7.7 million and proceeds from the sale of patents of $3.5 million.

Net cash used in financing activities was $ 0.1 million for the three months ended April 30, 2006, compared to $ 0.4 million of net cash
used in financing activities for the three months ended May 1, 2005. The net cash used in financing activities for the three months ended April 30, 2006 is due to payments on capital lease obligations of $0.1 million. The net cash used in
financing activities for the three months ended May 1, 2005 is due to payments on capital lease obligations of $0.4 million.

Our
lease for our headquarters in Santa Clara, California expires in April 2010. We lease offices in Israel and India under operating leases that expire in September 2006 for Israel and in December 2006 for India. On February 1, 2005, we entered
into a sublease agreement to sub-lease 10,000 square feet in our Santa Clara facility for a two-year period starting on March 15, 2005 for $12,000 per month.

We lease software licenses under capital leases. See Note 6, Obligations under Capital Leases, in the condensed consolidated financial statements for additional information.

The future minimum payments relating to facility leases, software leases and non-cancelable purchase orders are included in the contractual obligations
table below.

Contractual Obligations

The following summarizes the Companys contractual obligations at April 30, 2006, and the effect such obligations are expected to have on our liquidity and cash flow (in thousands).



|                                   |  |            |       |            |   |            |  |            |       |            |   |            |  |       |     |  |   |  |   |      
|---------------------------------- |  | ---------- | ----- | ---------- | - | ---------- |  | ---------- | ----- | ---------- | - | ---------- |  | ----- | --- |  | - |  | - | -----
|                                   |  | Fiscal2007 |       | Fiscal2008 |   | Fiscal2009 |  | Fiscal2010 |       | Fiscal2011 |   | Thereafter |  | Total
|CONTRACTUAL OBLIGATIONS            |  |            |       |            |   |            |  |            |       |            |   |            |  |       |     |  |   |  |   |      
|Operating leases                   |  | $          | 744   |            | $ | 1,028      |  | $          | 1,073 |            | $ | 1,100      |  | $     | 277 |  |  |  | $ | 4,222
|Capital leases                     |  |            | 1,528 |            |   | 643        |  |            |      |            |   |           |  |       |    |  |  |  |   | 2,171
|Non-cancelable purchase orders     |  |            | 263   |            |   |           |  |            |      |            |   |           |  |       |    |  |  |  |   | 263  
|                                   |  |            |       |            |   |            |  |            |       |            |   |            |  |       |     |  |   |  |   |      
|Total contractual cash obligations |  | $          | 2,535 |            | $ | 1,671      |  | $          | 1,073 |            | $ | 1,100      |  | $     | 277 |  |  |  | $ | 6,656
|                                   |  |            |       |            |   |            |  |            |       |            |   |            |  |       |     |  |   |  |   |      



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Off-Balance Sheet Arrangements

As of April 30, 2006, we had no off-balance sheet arrangements as defined in Item 303(a) (4) of Regulation S-K.

Recent Accounting Pronouncements

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155
(SFAS 155), Accounting for Certain Hybrid Financial Instruments which amends Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging
Activities and Statement of Financial Accounting Standards No. 140 (SFAS 140), Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 simplifies the accounting for
certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions
of SFAS 133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006. We do not expect the adoption of SFAS 155 to have a
material impact on our consolidated financial position, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Companys cash, cash equivalents and short-term investments are exposed to financial market risk due to fluctuations in interest rates, which may
affect our interest income. As of April 30, 2006, the Companys cash, cash equivalents and short-term investments earned interest at an average rate of 4.8%. Due to the short-term nature of the Companys investment portfolio,
operating results or cash flows are vulnerable to sudden changes in market interest rates. Assuming a decline of 10% in the market interest rates at April 30, 2006, with consistent cash balances, interest income would be adversely affected by
approximately $26,000 per quarter. The Company does not use its investment portfolio for trading or other speculative purposes.

Foreign Currency
Exchange Risk

Currently all of the Companys sales and substantially all of its expenses are denominated in U.S. dollars.
As a result, the Company has relatively little exposure to foreign currency exchange rate risk. The Company does not currently enter into forward exchange contracts to hedge exposures denominated in foreign currencies or any other derivative
financial instruments for trading or speculative purposes. However, in the event exposure to foreign currency risk increases, the Company may choose to hedge those exposures.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period
covered by this report. Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.



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(b) Changes in Internal Controls

During the first quarter of fiscal 2007, there have been no changes in the Companys internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

(c) Inherent Limitations on Effectiveness of Controls

The Companys management, including the CEO and CFO, does not expect that our internal control over financial reporting will prevent or detect all
error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Part II. Other Information

Item 1A.Risk Factors

The factors discussed below are cautionary statements that identify
important risk factors that could cause actual results to differ materially from those anticipated in the forward-looking statements in this Quarterly Report on Form 10-Q/A. If any of the following risks actually occurs, our business, financial
condition and results of operations would suffer. In this case, the trading price of our common stock could decline and investors might lose all or part of their investment in our common stock.

We Expect to Continue to Incur Significant Losses and Consume Cash in Operations in the Fiscal Year Ending January 28, 2007

We have been incurring substantial losses and consuming cash in operations as we invest heavily in new product development in advance of achieving
significant customer sales. This is expected to continue during the fiscal year ending January 28, 2007. Our ability to achieve cash flow breakeven is likely to depend on the success of our MiMagic 6+ and NeoMobileTV products. However, even if
the, MiMagic 6+ and NeoMobileTV achieve widespread customer acceptance, the length of customer design-in cycles would preclude substantial product shipments in the fiscal year ending January 28, 2007. Accordingly, even if these new products are
successful, we are likely to incur significant additional losses and consume cash in operations during the fiscal year ending January 28, 2007.

We Are Likely To Need Additional Capital

Given the long cycle times required to achieve design wins, convert customer
design wins into production orders, and for customers to achieve volume shipments of their products, we are likely to require additional working capital to fund our business. We believe that our existing capital resources will be sufficient to meet
our capital requirements through at least the end of our fiscal year ending January 28, 2007. However, we expect we will need to raise additional capital to fund future operating activities beyond January 28, 2007. Our future capital
requirements will depend on many factors, including the rate of net sales growth, timing and extent of spending to support research and development programs in new and existing areas of technology, expansion of sales and marketing support
activities, and timing and customer acceptance of new products. Our ability to raise capital and the terms of any financing will depend, in part, on our ability to establish customer engagements and generate sales. As discussed below, revenue
performance is difficult to forecast. We cannot assure you that additional equity or debt financing, if required, will be available on acceptable terms or at all.



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Our Revenues Are Difficult To Predict

For a variety of reasons, revenues are difficult to predict and may vary significantly from quarter to quarter. Our ability to achieve design wins depends
on a number of factors, many of which are outside of our control, including changes in the customers strategic and financial plans, competitive factors and overall market conditions. As our experience demonstrates, design wins themselves do
not always lead to production orders because the customer may cancel or delay products for a variety of reasons. Such reasons may include the performance of a particular product that may depend on components not supplied by NeoMagic, market
conditions, reorganizations or other internal developments at the customer and changes in customer personnel or strategy. Even when a customer has begun volume production of a product containing our chips, volumes are difficult to forecast because
there may be no history to provide a guide, and because market conditions and other factors may cause changes in the customers plans. Because of the market uncertainties they face, many customers place purchase orders on a short lead-time
basis, rather than providing reliable long-term purchase orders or purchase forecasts.

The difficulty in forecasting revenues increases
the difficulty in forecasting our working capital requirements. It also increases the likelihood that we may overproduce particular parts, resulting in inventory charges, or under produce particular parts, affecting our ability to meet customer
requirements. The difficulty in forecasting revenues also restricts our ability to provide forward-looking revenue and earnings guidance to the financial markets and increases the chance that our performance does not match forecasts.

Uncertainty Regarding Future Licensing Revenue

In
the third quarter of fiscal 2006, we collected gross licensing revenue of $8.5 million, of which, net of commissions and expenses, we actually received $5.6 million, from the nonexclusive licensing of all of our patents to Sony Corporation of Tokyo,
Japan. We cannot assure you that we will be able to generate any future licensing revenue from our 27 patents or from any future patents that we will own or have the right to license. The licensing agreement with Sony may be the only licensing
agreement that we ever complete. Furthermore, if we should in the future complete an agreement to license our patents, we cannot assure you that the licensing revenue we receive from such license will equal or exceed the licensing revenue we
received from Sony.

We Depend on Qualified Personnel

Our future success depends in part on the continued service of our key engineering, sales, marketing, manufacturing, finance and executive personnel, and our ability to identify, hire and retain additional personnel.
There is strong competition for qualified personnel in the semiconductor industry, and we cannot assure you that we will be able to continue to attract and retain qualified personnel necessary for the development of our business. We have experienced
the loss of personnel through headcount reductions and attrition. We have recently lost some of our executive management. For example, Prakash Agarwal, one of our co-founders who was our President, Chief Executive Officer and a Director since our
founding, resigned from all these positions on April 19, 2005. Our new President and Chief Executive Officer, Douglas Young, has been with us only since February 2004. We cannot assure you that the resignation of Mr. Agarwal and the
appointment of Mr. Young will not have a material adverse effect on our business, financial condition and results of operations.

All
our executive officers are employees at will. We do not maintain key person insurance on any of our personnel. If we are not able to maintain key personnel, if our headcount is not appropriate for our future direction, or if we fail to
recruit key personnel critical to our future direction in a timely manner, this may have a material adverse effect on our business, financial condition and results of operations.



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In addition, our future success will depend in part on our ability to identify and retain qualified
individuals to serve on our board of directors. We believe that maintaining a board of directors comprised of qualified members is critical given the current status of our business and operations. Moreover, Nasdaq Stock Market rules require three
outside board members to serve on our audit committee. Any inability on our part to identify and retain qualified board members could have a material adverse effect on our business or could lead to the delisting of our securities from the Nasdaq
Stock Market.

We have a Limited Customer Base

Four customers accounted for 39%, 27%, 26% and 11%, respectively, of product revenue in the three months ended April 30, 2006. Four customers accounted for 28%, 16%, 14% and 13%, respectively, of product revenue in the three
months ended May 1, 2005. We expect that a small number of customers will account for a substantial portion of our product revenue for the foreseeable future. Furthermore, the majority of our sales were historically made, and are expected to
continue to be made, on the basis of purchase orders rather than pursuant to long-term purchase agreements. As a result, our business, financial condition and results of operations could be materially adversely affected by the decision of a single
customer to cease using our products, or by a decline in the number of handheld devices sold by a single customer.

We May Lose Our Customer
Base

Our products are designed to afford the mobile phone and handheld device manufacturer significant advantages with respect to
product performance, power consumption and size. To the extent that other future developments in components or subassemblies incorporate one or more of the advantages offered by our products, the market demand for our products may be negatively
impacted.

We Face Intense Competition in Our Markets

The market for Applications Processors is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining average selling prices. We believe that the principal
factors of competition in this market are video and 3D graphics performance, price, features, power consumption, size and customer support. Our ability to compete successfully in the Applications Processor market depends on a number of factors,
including success in designing and subcontracting the manufacture of new products that implement new technologies, product quality and reliability, price, ramp of production of our products, customer demand and acceptance of more sophisticated
multimedia functionality on mobile phones and other handheld devices, end-user acceptance of our customers products, market acceptance of competitors products and general economic conditions. Our ability to compete will also depend on
our ability to identify and ensure compliance with evolving industry standards and market trends.

We compete with both domestic and
international companies, some of which have substantially greater financial and other resources than us with which to pursue engineering, manufacturing, marketing and distribution of their products. Our principal competitors include Texas
Instruments, Renesas, ST Microelectronics and Broadcom as well as a number of vertically integrated electronics firms that are developing their own solutions. We may also face increased competition from new entrants into the market, including
companies currently at developmental stages. We believe we have significant intellectual properties and have historically demonstrated expertise in SOC technology. However, our inability to introduce timely new products for our market, to support
these products in customer programs, or to manufacture these products could have a material adverse effect on our business, financial condition and operating results.



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Some of our current and potential competitors operate their own manufacturing facilities. Since we do not
operate our own manufacturing facility and may from time-to-time make binding commitments to purchase products (binding purchase orders totaling $263,000 were outstanding as of April 30, 2006), we may not be able to reduce our costs and cycle
time or adjust our production to meet changing demand as rapidly as companies that operate their own facilities, which could have a material adverse effect on our results of operations. In addition, if production levels increase the amount of
binding purchase orders may increase significantly.

Our Products May be Incompatible with Evolving Industry Standards and Market Trends

Our ability to compete in the future will also depend on our ability to identify and ensure compliance with evolving industry standards and market
trends. Unanticipated changes in market trends and industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers. As a result, we could be required to invest significant
time and resources to redesign our products or obtain license rights to technologies owned by third parties to comply with relevant industry standards and market trends. We cannot assure you that we will be able to redesign our products or obtain
the necessary third-party licenses within the appropriate window of market demand. If our products are not in compliance with prevailing market trends and industry standards for a significant period of time, we could miss crucial OEM and ODM design
cycles, which could result in a material adverse effect on our business, financial condition and results of operations.

We Depend on New Product
Development to Meet Rapid Market and Technological Change

NeoMagic is focused on providing high-performance semiconductor solutions for
sale to manufacturers of mobile phones and handheld devices. New product planning is focused on integrated SOC semiconductor products for handheld devices that integrate multimedia technologies such as H.264 video compression, 3D graphics and audio
technologies. Our future business, financial condition and results of operations will depend to a significant extent on our ability to develop new products that address these market opportunities. As a result, we believe that significant
expenditures for research and development will continue to be required in the future.

We must anticipate the features and functionality
that consumers and infrastructure providers will demand, incorporate those features and functionality into products that meet the exacting design requirements of equipment manufacturers, price our products competitively and introduce new products to
the market on a timely basis. The success of new product introductions is dependent on several factors, including proper new product definition, timely completion and introduction of new product designs, the ability to create or acquire intellectual
property, the ability of manufacturing partners to effectively manufacture new products, quality of new products, differentiation of new products from those of our competitors and market acceptance of our products and the products of our customers.
We cannot assure you that the products we expect to introduce will incorporate the features and functionality demanded by mobile phone and handheld device manufacturers and consumers, will be successfully developed, or will be introduced within the
appropriate window of market demand. We cannot assure you that customers who use our semiconductor products will achieve the levels of market success with their own products that they may project to us.

Because of the complexity of our products, we often have experienced delays in completing development and introduction of new products. If there are
delays in production of current products, or in the completion of development of future products, including the products currently under development for introduction over the next 12 to 18 months, our potential future business, financial condition,
and results of operations will be materially adversely affected. In addition, the time required for competitors to develop and introduce competing products may be shorter, their manufacturing yields may be better, and their production costs may be
lower than those experienced by us.



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We Depend on Third-Party Manufacturers to Produce Our Products

Our products require wafers manufactured with state-of-the-art fabrication equipment and techniques. We currently use several third-party foundries for
wafer fabrication. We expect that, for the foreseeable future, some of our products will be manufactured by a single source. For example, our MiMagic 3, MiMagic 5 and MiMagic 6+ products are all manufactured at Taiwan Semiconductor Manufacturing
Corporation on a purchase order by purchase order basis. Since, in our experience, the lead time needed to establish a relationship with a new wafer fabrication partner is at least 12 months, and the estimated time for a foundry to switch to a new
product line ranges from four to nine months, we may have no readily available alternative source of supply for specific products. A manufacturing disruption experienced by our manufacturing partners, the failure of our manufacturing partners to
dedicate adequate resources to the production of our products, or the financial instability of our manufacturing partners would have a material adverse effect on our business, financial condition and results of operations. Furthermore, if the
transition to the next generation of manufacturing technologies by our manufacturing partners is unsuccessful, our business, financial condition and results of operations would be materially and adversely affected.

We have many other risks because we depend on third-party manufacturers, including: reduced control over delivery schedules, quality, manufacturing
yields and cost; the potential lack of adequate capacity during periods of excess demand; limited warranties on wafers supplied to us; and potential misappropriation of our intellectual property. We are dependent on our manufacturing partners to
produce wafers with acceptable quality and manufacturing yields, to deliver those wafers on a timely basis to our third party assembly subcontractors and to allocate a portion of their manufacturing capacity sufficient to meet our needs. Although
our products are designed using the process design rules of the particular manufacturer, we cannot assure you that our manufacturing partners will be able to achieve or maintain acceptable yields or deliver sufficient quantities of wafers on a
timely basis or at an acceptable cost. Additionally, we cannot assure you that our manufacturing partners will continue to devote adequate resources to produce our products or continue to advance the process design technologies on which the
manufacturing of our products are based.

We Rely on Third-Party Subcontractors to Assemble and Test Our Products

Our products are assembled and tested by third-party subcontractors. We do not have long-term agreements with any of these subcontractors. Such assembly
and testing is conducted on a purchase order basis. Because we rely on third-party subcontractors to assemble and test our products, we cannot directly control product delivery schedules, which could lead to product shortages or quality assurance
problems that could increase the costs of manufacturing or assembly of our products. Due to the amount of time normally required to qualify assembly and test subcontractors, product shipments could be delayed significantly if we were required to
find alternative subcontractors. Any problems associated with the delivery, quality or cost of the assembly and test of our products could have a material adverse effect on our business, financial condition and results of operations.

We May Encounter Inventory Excess or Shortage

The
lead times required by our wafer manufacturers have increased over the last year. However, market conditions require that we be prepared to ship products to our customers with much shorter lead times. Consequently, to have product inventory to meet
potential customer purchase orders, we sometimes place purchase orders for wafers from our manufacturers in advance of having firm purchase orders from our customers. We had binding orders for wafers totaling $263,000 outstanding as of
April 30, 2006. If we



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do not have sufficient demand for our products and cannot cancel our current and future commitments without material
impact, we may experience excess inventory, which will result in a write-off affecting gross margin and results of operations. If we cancel a purchase order, we must pay cancellation penalties based on the status of work in process or the proximity
of the cancellation to the delivery date. We must place purchase orders for wafers before we receive purchase orders from our own customers. This limits our ability to react to fluctuations in demand for our products, which can be unexpected and
dramatic, and from time-to-time will cause us to have an excess or shortage of wafers for a particular product. As a result of the long lead-time for manufacturing wafers and the increase in just in time ordering by customers,
semiconductor companies from time-to-time take charges for excess inventory. We did in fact incur such charges in fiscal 2006 of $0.2 million and in fiscal 2005 of $0.4 million. Significant write-offs of excess inventory have had and could continue
to have a material adverse effect on our financial condition and results of operations. Conversely, failure to order sufficient wafers would cause us to miss revenue opportunities and, if significant, could impact sales by our customers, which could
adversely affect our customer relationships and thereby materially adversely affect our business, financial condition and results of operations.

Our
Manufacturing Yields May Fluctuate

Fabricating semiconductors is an extremely complex process, which typically includes hundreds of
process steps. Minute levels of contaminants in the manufacturing environment, defects in masks used to print circuits on a wafer, variation in equipment used and numerous other factors can cause a substantial percentage of wafers to be rejected or
a significant number of die on each wafer to be nonfunctional. Many of these problems are difficult to diagnose and time consuming or expensive to remedy. As a result, semiconductor companies often experience problems in achieving acceptable wafer
manufacturing yields, which are represented by the number of good die as a proportion of the total number of die on any particular wafer. We often purchase wafers, not die, and pay an agreed upon price for wafers meeting certain acceptance criteria.
Accordingly, we bear the risk of the yield of good die from wafers purchased meeting the acceptance criteria.

Semiconductor manufacturing
yields are a function of both product design, which is developed largely by us, and process technology, which is typically proprietary to the manufacturer. Historically, we have experienced lower yields on new products. Since low yields may result
from either design or process technology failures, yield problems may not be effectively determined or resolved until an actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are
used. As a result, yield problems may not be identified until well into the production process, and resolution of yield problems would require cooperation and communication between the manufacturer and us. This risk is compounded by the offshore
location of our manufacturers, increasing the effort and time required to identify, communicate and resolve manufacturing yield problems. As our relationships with new manufacturing partners develop, yields could be adversely affected due to
difficulties associated with adapting our technology and product design to the proprietary process technology and design rules of each manufacturer. Any significant decrease in manufacturing yields could result in an increase in our per unit product
cost and could force us to allocate our available product supply among our customers, potentially adversely impacting customer relationships as well as revenues and gross margins. We cannot assure you that our manufacturers will achieve or maintain
acceptable manufacturing yields in the future.

Uncertainty and Litigation Risk Associated with Patents and Protection of Proprietary Rights

We rely in part on patents to protect our intellectual property. As of April 30, 2006, we had been issued 27 patents. These 27
issued patents are scheduled to expire between June 2014 and June 2024. In April 2005, we sold 58 patents to Faust Communications, LLC for net proceeds of $3.5 million. The patents sold related to products we no longer sell and not to products that
we currently sell or plan to sell. We retained a worldwide, non-exclusive license under the patents sold. The sale did not include several of our



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important patents covering embedded DRAM technology nor any of the unique array processing technology used in our MiMagic
6+ and NeoMobileTV products. Additionally, we have several patent applications pending. We cannot assure you that our pending patent applications, or any future applications, will be approved. Further, we cannot assure you that any issued patents
will provide us with significant intellectual property protection, competitive advantages, or will not be challenged by third parties, or that the patents of others will not have an adverse effect on our ability to do business. In addition, we
cannot assure you that others will not independently develop similar products, duplicate our products or design around any patents that may be issued to us.

We also rely on a combination of mask work protection, trademarks, copyrights, trade secret laws, employee and third-party nondisclosure agreements and licensing arrangements to protect our intellectual property.
Despite these efforts, we cannot assure you that others will not independently develop substantially equivalent intellectual property or otherwise gain access to our trade secrets or intellectual property, disclose such intellectual property or
trade secrets, or that we can meaningfully protect our intellectual property. Our failure to meaningfully protect our intellectual property could have a material adverse effect on our business, financial condition and results of operations.

As a general matter, the semiconductor industry has experienced substantial litigation regarding patent and other intellectual property
rights. In December 1998, the Company filed a lawsuit in the United States District Court for the District of Delaware seeking damages and an injunction against Trident Microsystems, Inc. The suit alleged that Tridents embedded DRAM graphics
accelerators infringe certain patents held by the Company. In January 1999, Trident filed a counter claim against the Company alleging an attempted monopolization in violation of antitrust laws, arising from NeoMagics filing of the patent
infringement action against Trident. The Court ruled that there was no infringement by Trident. The Company filed an appeal in the United States Court of Appeals, for the Federal Circuit. On April 17, 2002, the United States Court of Appeals
for the Federal Circuit affirmed the lower courts judgment of non-infringement on one patent and vacated the courts judgment of non-infringement on another patent, thereby remanding it to the lower court for further proceedings. In
November 2002, the lower court heard oral arguments on cross-motions for summary judgment on the matter. In May 2003, the lower court ruled in favor of Trident. In December 2003, the Company filed an appeal in the United States Court of Appeals, for
the Federal Circuit. In August 2004, the Federal Circuit rejected the appeal and affirmed the lower courts decision of no infringement by the Trident products. On September 2, 2005 the United States District Court for the District of
Delaware approved the Trident request that its counterclaim against NeoMagic filed in January 1999 be dismissed without prejudice.

Any
patent litigation, whether or not determined in our favor or settled by us, would at a minimum be costly and could divert the efforts and attention of our management and technical personnel from productive tasks, which could have a material adverse
effect on our business, financial condition and results of operations. We cannot assure you that current or future infringement claims by third parties or claims for indemnification by customers or end users of our products resulting from
infringement claims will not be asserted in the future or that such assertions, if proven to be true, will not materially adversely affect our business, financial condition and results of operations. If any adverse ruling in any such matter occurs,
we could be required to pay substantial damages, which could include treble damages, to cease the manufacturing, use and sale of infringing products, to discontinue the use of certain processes, or to obtain a license under the intellectual property
rights of the third party claiming infringement. We cannot assure you, however, that a license would be available on reasonable terms or at all. Any limitations in our ability to market our products, or delays and costs associated with redesigning
our products or payments of license fees to third parties, or any failure by us to develop or license a substitute technology on commercially reasonable terms could have a material adverse effect on our business, financial condition and results of
operations.



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We Depend on Foreign Sales and Suppliers

Export sales have been a critical part of our business. Sales to customers located outside the United States (including sales to the foreign operations of
customers with headquarters in the United States and foreign manufacturers that sell to United States-based OEMs) accounted for 89% and 78% of our product revenue for the three months ended April 30, 2006 and May 1, 2005, respectively. We
expect that product revenue derived from foreign sales will continue to represent a significant portion of our total product revenue. Letters of credit issued by customers have supported a portion of our foreign sales. To date, our foreign sales
have been denominated in United States dollars. Increases in the value of the U.S. dollar relative to the local currency of our customers could make our products relatively more expensive than competitors products sold in the customers
local currency.

Foreign manufacturers have produced, and are expected to continue to produce for the foreseeable future, all of our
wafers. In addition, many of the assembly and test services we use are procured from foreign sources. Wafers are priced in U.S. dollars under our purchase orders with our manufacturing suppliers.

Foreign sales and manufacturing operations are subject to a variety of risks, including fluctuations in currency exchange rates, tariffs, import
restrictions and other trade barriers, unexpected changes in regulatory requirements, longer accounts receivable payment cycles, potentially adverse tax consequences and export license requirements. In addition, we are subject to the risks inherent
in conducting business internationally including foreign government regulation, political and economic instability, and unexpected changes in diplomatic and trade relationships. Moreover, the laws of certain foreign countries in which our products
may be developed, manufactured or sold, may not protect our intellectual property rights to the same extent as do the laws of the United States, thus increasing the possibility of piracy of our products and intellectual property. We cannot assure
you that one or more of these risks will not have a material adverse effect on our business, financial condition and results of operations.

Our
Financial Results Could Be Affected by Changes in Accounting Principles

Generally accepted accounting principles in the United States
are subject to issuance and interpretation by the Financial Accounting Standards Board, or FASB, the American Institute of Certified Public Accountants, the SEC, and various bodies formed to promulgate and interpret appropriate accounting
principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. For example, in December
2004, FASB issued SFAS 123(R), Share-Based Payment, which replaces SFAS 123 and supersedes APB 25. As required, we adopted SFAS 123(R) in our first quarter of fiscal year 2007. SFAS 123(R) requires that compensation costs relating to
share-based payment transactions be recognized in the financial statements. The pro forma disclosure previously permitted under SFAS 123 is no longer an acceptable alternative to recognition of expense in the financial statements. The adoption of
SFAS 123(R) will result in a decrease in any earnings that we report.

Our Stock Price May Be Volatile

The market price of our Common Stock, like that of other semiconductor companies, has been and is likely to continue to be, highly volatile. The market
has from time to time experienced significant price and volume fluctuations that may be unrelated to the operating performance of particular companies. The market price of our Common Stock could be subject to significant fluctuations in response to
various factors, including sales of our common stock, quarter-to-quarter variations in our anticipated or actual operating results, announcements of new products, technological innovations or setbacks by us or our competitors, general conditions in
the semiconductor industry, unanticipated shifts in the markets for mobile phones and other handheld devices or changes in industry standards, losses of key customers, litigation



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commencement or developments, the impact of our financing activities, including dilution to shareholders, changes in or
the failure by us to meet estimates of our performance by securities analysts, market conditions for high technology stocks in general, and other events or factors. In future quarters, our operating results may be below the expectations of public
market analysts or investors.

Potential Nasdaq Stock Market Delisting

On February 28, 2005, we received a notice from the Nasdaq Stock Market that we were no longer in compliance with the requirements for continued inclusion of our common stock on the Nasdaq National Market
pursuant to the Nasdaqs Marketplace Rule 4450(a)(5) (the Rule) because our common stock had closed below $1.00 per share for 30 consecutive business days. We were given 180 calendar days, or until August 29, 2005, to regain
compliance with the Rule. To regain compliance with the Rule, the closing bid price of our common stock had to be $1.00 per share or more for a minimum of 10 consecutive business days before August 29, 2005. To regain compliance with the Rule,
we effected a five-for-one reverse stock split on August 12, 2005 that brought the closing bid price of our common stock above $1.00. The closing bid price of our common stock has stayed above $1.00 since the reverse stock split occurred.

If we fail to comply with the continued listing requirements of the Nasdaq National Market, including the minimum bid price per share
requirement and the minimum stockholders equity requirement, we may be delisted from trading on such market, and thereafter trading in our common stock, if any, would be conducted through the Nasdaq Capital Market, the over-the-counter market or on
the Electronic Bulletin Board of the National Association of Securities Dealers, Inc. There is no guarantee that an active trading market for our common stock will be maintained on the Nasdaq National Market. You may not be able to sell your shares
quickly, at the market price or at all if trading in our stock is not active.

Item 6.Exhibits

The following Exhibits are filed as part of, or incorporated
by reference into, this Report:



|         |  |                                                                                                                                                              
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number   |  | Description                                                                                                                                                  
|3.1 (9)  |  | Amended and Restated Certificate of Incorporation.                                                                                                           
|         | 
|3.2 (1)  |  | Bylaws.                                                                                                                                                      
|         | 
|4.1 (5)  |  | Preferred Stock Rights Agreement dated December 19, 2002, between the Company and EquiServe Trust Company, N.A.                                              
|         | 
|4.2 (8)  |  | Amendment to Rights Agreement, dated as of August 20, 2004, between the Company and EquiServe Trust Company, N.A.                                            
|         | 
|4.3 (7)  |  | Series A Warrant to Satellite Strategic Finance Associates, LLC, dated August 20, 2004.                                                                      
|         | 
|4.4 (7)  |  | Series B Warrant to Satellite Strategic Finance Associates, LLC, dated August 20, 2004.                                                                      
|         | 
|4.5 (7)  |  | Registration Rights Agreement dated August 19, 2004 by and between the Company and Satellite Strategic Finance Associates, LLC.                              
|         | 
|4.6 (4)  |  | Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock.                                                  
|         | 
|4.7 (7)  |  | Amended and Restated Certificate of Designations, Preferences and Rights of the Series B Convertible Preferred Stock dated August 20, 2004.                  
|         | 
|4.8 (11) |  | Registration Rights Agreement dated December 13, 2005 by and between the Company and named Private Investors.                                                
|         | 
|4.9 (11) |  | Warrant to Registration Rights Agreement dated December 13, 2005.                                                                                            
|         | 
|10.1 (1) |  | Form of Indemnification Agreement entered into by the Company with each of its directors and executive officers.                                             
|         | 
|10.2 (2) |  | Lease Agreement, dated as of October 9, 1997, between the Company and A&P Family Investments, as landlord for the leased premises located at 3250 Jay Street.
|         | 
|10.3 (1) |  | Amended and Restated 1993 Stock Plan and related agreements.                                                                                                 
|         | 
|10.4 (1) |  | Lease Agreement, dated as of February 5, 1996, between the Company and A&P Family Investments, as landlord.                                                  



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|           |  |                                                                                                                                                                               
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.5 (1)   |  | 1997 Employee Stock Purchase Plan, with exhibit.                                                                                                                              
|           | 
|10.6 (13)  |  | 1998 Nonstatutory Stock Option Plan amended December 22, 2005.                                                                                                                
|           | 
|10.7 (6)   |  | 2003 Stock Option Plan.                                                                                                                                                       
|           | 
|10.8 (3)   |  | Amendment No. 1, dated as of February 26, 2002, between the Company and A&P Family Investments, as landlord for the leased premises located at 3250 Jay Street.               
|           | 
|10.9 (7)   |  | Securities Purchase Agreement dated August 19, 2004 by and between the Company and Satellite Strategic Finance Associates, LLC.                                               
|           | 
|10.10 (7)  |  | Amended and Restated Patent Licensing Agreement dated March 28, 2005 by and between the Company and The Consortium for Technology Licensing, Ltd.                             
|           | 
|10.11 (7)  |  | Patent Purchase Agreement dated April 6, 2005 by and between the Company and Faust Communications, LLC.                                                                       
|           | 
|10.12 (8)  |  | Settlement Agreement and Release dated May 31, 2005 between the Company and Prakash Agarwal.                                                                                  
|           | 
|10.13 (10) |  | Patent License Agreement dated September 1, 2005 between the Company and Sony Corporation.                                                                                    
|           | 
|10.14 (11) |  | Securities Purchase Agreement dated December 13, 2005 by and between the Company and named Private Investors.                                                                 
|           | 
|10.15 (12) |  | Form of Retention Bonus Agreement, dated as of January 13, 2006.                                                                                                              
|           | 
|31.1       |  | Certification of the Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|           | 
|31.2       |  | Certification of the Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|           | 
|32.1       |  | Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                        
|           | 
|32.2       |  | Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                        

---

|(1) | Incorporated by reference to the Companys registration statement on Form S-1, registration no. 333-20031.
|--- | ----------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to the Companys Form 10-Q for the period ended October 26, 1997.
|--- | -------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to the Companys Form 10-Q for the quarter ended October 27, 2002.
|--- | --------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to the Companys Form 8-A filed December 23, 2002.
|--- | ----------------------------------------------------------------------------

|(5) | Incorporated by reference to the Companys Form 8-K filed December 23, 2002.
|--- | ----------------------------------------------------------------------------

|(6) | Incorporated by reference to the Companys S-8 registration statement filed September 22, 2003.
|--- | -----------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to the Companys Form 8-K filed August 20, 2004.
|--- | --------------------------------------------------------------------------

|(8) | Incorporated by reference to the Companys Form 8-A/A filed August 23, 2004
|--- | ---------------------------------------------------------------------------

|(9) | Incorporated by reference to the Companys Form 10-Q for the quarter ended July 31, 2005.
|--- | -----------------------------------------------------------------------------------------

|(10) | Incorporated by reference to the Companys Form 10-Q for the quarter ended October 30, 2005.
|---- | --------------------------------------------------------------------------------------------

|(11) | Incorporated by reference to the Companys Form 8-K filed December 16, 2005.
|---- | ----------------------------------------------------------------------------

|(12) | Incorporated by reference to the Companys Form 8-K filed January 19, 2006.
|---- | ---------------------------------------------------------------------------

|(13) | Incorporated by reference to the Companys Form 10-K for the year ended January 29, 2006.
|---- | -----------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.



NEOMAGIC CORPORATION(Registrant)/s/ Scott SullingerSCOTT SULLINGERV.P. Finance and Chief Financial Officer( Authorized Officer and Principal Financial Officer)October 27, 2006




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